The Efficient Ophthalmologist

Pass-through: Who benefits, who pays?

By Steven M. Silverstein, MD, FACS

March 1, 2019

The new frontier in drug delivery entails a paradigm shift.

My involvement in clinical research combined with reading research and attending most of our national meetings has led me to one conclusion: The next decade will explode not primarily with new molecules, but with alternative methods of drug delivery.

With this paradigm shift will come an equally significant debate over the cost of these products and their (physician) procedure codes — as well as the recognition that such a shift entails a movement away from the conventional payer system.

Both surgical and non-surgical technologies will soon be taking center stage; for instance, many novel and game-changing technologies will finally take the patient (and the issue of compliance) out of the equation for the treatment of glaucoma. We have already seen significant strides made in sustained-release medications implanted into the vitreous for chronic DME and posterior uveitis. New retinal laser technology is well underway for the rejuvenation of retinal cells in an effort to decrease the conversion of dry AMD into wet, and thus decrease the number of patients requiring anti-VEGF treatment.

But perhaps the biggest area of research and opportunity comes in the peri-operative arena, with dissolving, biodegradable pellets, rods and micro-spherules impregnated with steroids, NSAIDS and antibiotics.

OUR OPTIONS TODAY

So, what do we have now? Currently, two medications for intra-/peri-operative use are FDA approved and enjoy pass-through status:

Omidria (Omeros Corp.), the combination of phenylephrine and ketorolac administered through the irrigating solution, approved for the maintenance of pupillary mydriasis during cataract and lens replacement surgery and the treatment of peri-operative pain, and

Dexycu (EyePoint Pharm-aceuticals), a soon-to-be-released formulation of dexamethasone injected directly into the anterior chamber at the end of cataract surgery approved for the reduction of post-operative inflammation, potentially eliminating the need for a postoperative steroid eyedrop.

GET TO KNOW PASS-THROUGH

Pass-through was created by Congress in 2000 [Social Security Act 1833(t)(6)], established in an effort to promote the development of new pharmaceuticals, medical devices and biologicals. All fields of medicine have access to this program, which, despite tight scrutiny and deep cuts in all other areas of health care, has been deliberately kept intact as originally outlined. Since Medicare’s payment systems are based upon prior claims, new products coming to market are handicapped because their costs and utilization will not be reflected by historic data.

Pass-through is a time-limited event, typically two or three years, though for the very first time, it was extended an additional two years (beginning Oct. 1, 2018) to further evaluate Omidria. The benefit is twofold: First, Medicare patients receive the new medication or device without cost to them or the facility (hospital or ASC), though non-Medicare patients may be billed a co-pay in certain circumstances, just as they are billed a co-pay for the use of the ASC.

Second, it gives CMS an opportunity to determine the utilization of new products and to assess its benefit to patients on a large scale, in order to calculate the potential cost of the product to CMS once the product comes off pass-through status.

PASS-THROUGH PRICING

The regulations that govern which products may qualify for pass-through are, as you can imagine, quite rigorous. The value assigned to a given product must be set at a minimum floor price, determined by a specific formula established by Congress. This pricing is not intended to remain at the original rate (after an initial price point of WAC-wholesale acquisition cost +6%, then ASP-average sales price +6% for the remainder of the pass-through period).

Rather, once CMS gathers data on product utilization, it determines a lower price point for the product after the transitional pass-through period has expired.

It is critical to understand that the pass-through account is funded each year in anticipation of the added expense for the analysis of new drugs and devices, so CMS has set aside the resources in advance. This separate account is completely independent from the funds that pay for doctors’ services and hospital/ASC facility charges, and there is no potential of adversely affecting physician or facility reimbursement as new technologies hit the market.

Dr. Thomas A. Gustafson, a principle at Arnold and Porter LLP and an expert in CMS and healthcare legislation, said in a 2015 editorial in ASC Focus, “Transitional [time-limited] pass-through payments can help an ASC give its Medicare patients access to novel therapies without increasing the ASC’s cost or overall spending in the U.S. health care system.”

FINAL THOUGHTS

Please note that the concept of pass-through is not new to ophthalmologists. For several years, ASCs received a bump in the reimbursement for certain lens implants that represented either new materials or touted novel design changes potentially beneficial to our patients. You may recall that this was referred to as NTIOL — or new technology IOL — again, a time-limited trial used to incentivize and promote innovation while teaching CMS what benefits from these new lens implants truly exist and what the adoption rate of these technologies might be after NTIOL status is retired.

Remember, pass-through payments do not adversely affect physician fees now or in the future. Despite the robust size of the pass-through fund, Dr. Gustafson notes that in 2015 only 35 medications total received this status across all medical specialties.

“Performing as it was designed, the transitional pass-through provision benefits Medicare patients [and many others as third-party payors follow suit] and ASCs by facilitating reimbursement for innovative technology now and paving the way for its incorporation into routine use and standard Medicare reimbursement later,” Dr. Gustafson said. OM

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Now more than ever before, ophthalmologists are required to think as an MD and a CEO. The right balance of clinical and practice management skills is critical for a practice to flourish. Each month only one publication delivers the essential strategies needed to navigate and grow today’s ophthalmology practice. Led by Chief Medical Editor Larry Patterson, MD, Ophthalmology Management provides all the tools ophthalmologists need to succeed, bringing them the latest practice management pearls, clinical advancements and medical economics they need to help their practices grow.